Federal Government
Federal Home Loan Bank Act
July 22, 1932 - Hoover administration

Increasingly dire economic circumstances caused by the Depression in 1932 spurred President Herbert Hoover to press Congress for action. In particular, he wanted to encourage home construction, reduce foreclosures and support the idea of widespread home ownership.

The congressional response came in the form of the Federal Home Loan Bank Act that created a five-member Federal Home Loan Bank Board, whose role was to supervise a series of discount banks spread across the country. Initial capitalization of $125 million was provided.

The intent of this system was to increase the supply of money available to local institutions that made home loans and to serve them as a reserve credit resource. Existing financial institutions — savings banks, insurance companies, building and loan associations, etc. — could apply for membership in the system.

The law appeared to have a beneficial impact. The rate of foreclosures dropped noticeably after the banks began functioning, but the change came too late for thousands of families. This measure also is credited with providing new jobs in the home construction industry.

The Federal Home Loan Bank system, like the Reconstruction Finance Corporation, foreshadowed the more activist role of government that would later describe a host of New Deal programs.

See other aspects of Hoover's domestic policy.

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